Fix your mortgage for longer – lenders cut five-year fixed-rates to historic lows

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Mortgage price war sees some of the cheapest deals EVER as several lenders slash five-year fixed rates to as low as 1.44%

  • TSB offers five-year fix at just 1.44 per cent at 60 per cent loan-to-value
  • Virgin Money, Skipton and Santander are also offering five-year fixes below 1.5%
  • Experts say rates could get even lower if the Bank of England cuts base rate

Mortgage lenders are slashing rates on five year deals to some of their lowest ever levels as the prospect of a Bank of England rate cut reared its head this week. 

While the average five-year fix currently sits at 2.60 per cent, those with bigger deposits now have access to several five-year fixes below 1.50 per cent for the first time in years. 

This is the lowest rates have been since Atom Bank briefly introduced a shock 1.29 per cent five-year fix in 2017, and the first time multiple lenders have offered five-year fixed rates this low.  

TSB currently has the best five-year fix on offer at 1.44 per cent with a £1,494 fee up to 60 per cent loan-to-value.

Lenders are cutting their five-year fxed deals to the 'lowest mainstream rates have been'

 Lenders are cutting their five-year fxed deals to the ‘lowest mainstream rates have been’

By comparison, the very cheapest deal currently on the market is Natwest’s 1.19 per cent two-year fix, just 0.25 per cent cheaper.

On a £250,000 mortgage taken over 25 years TSB’s deal would result in monthly payments of just £993.

Virgin Money and Skipton both offer similar deals at 1.46 per cent with fees of £1,495, with the former’s up to 65 per cent loan-to-value and the latter’s up to 60 per cent loan-to-value.

Santander is the only other lender to currently offer a five-year fix below 1.50 per cent, with a 1.49 per cent deal up to 60 per cent loan-to-value with a fee of £1,048.

Andrew Montlake of mortgage broker Cicero

Andrew Montlake of mortgage broker Cicero

With the smaller fee, this deal is only marginally more expensive than TSB’s despite its higher rate. On a £250,000 mortgage taken over 25 years it would result in monthly payments of £999.

Andrew Montlake of mortgage broker Coreco said: ‘This is as low as mainstream rates have been.’

Mark Gordon, director of mortgages at Compare the Market, said: ‘There is potential speculation of a base rate cut early next year, which could drive rates even lower.

‘As borrowers look to fix for longer, seeking peace of mind over monthly repayments, lenders are making five and 10-year deals more attractive to tempt new customers.’   

Why are lenders cutting five-year fixes so much?

There has been a rise in the popularity of longer-term deals in general in recent months as a combination of economic uncertainty and cheap rates have tempted borrowers into fixing for longer.

That’s not the only factor at play. What are known as ‘swap’ rates, the rates upon lenders price their fixed-rate deals, have been consistently low for some time, with five year money being cheaper than two year money at one stage.

Average mortgage rates 
Mortgages Two-year fixed    Three-year fixed  Five-year fixed  Ten-year fixed 
Six months ago 2.47%    2.66%  2.85%  3.00% 
Last month  2.45%    2.60%  2.85%  2.98%   
Today  2.44%    2.60%  2.75%  2.91%   
Source: Moneyfacts 

Andrew Montlake said: ‘This is due to the fact that the global economy has weakened and coupled with the uncertainty of Brexit, the Bank of England has indicated that the next interest rate change may be a cut rather than a rise.

‘This has allowed lenders to offer cheaper fixed mortgage products, which has been exacerbated by the ongoing competitive nature of the mortgage market at present. 

‘Lenders are battling it out to both end the year well and start the new year with a good pipeline of business.’

There have been some signs in recent months that the price war between mortgage lenders has started to take its toll, however.

A slew of lenders have left the market this year, most of which cited pricing pressures. Even the bigger lenders have been affected, as evidenced by Santander which last week reported a hit to its profits as a result of low mortgage rates spurred by market competition.

‘Consumers have also wised up to the fact that fixing in for a longer time and managing their affordability is a good thing to do in a low rate environment,’ Montlake added.

‘As a result of all of this consumers are in a great position of seeing five-year fixes go from the sublime to the ridiculous and many are looking at finally buying that new home, making that move or remortgaging to a much better rate as they know these products will not last for ever.’





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